Figure 1. SK hynix received the Best ESG Bond award at the 2023 IFR Asia Awards dinner

The Inner Workings of SK hynix’s Triple-Tranche Bond

SK hynix’s triple-tranche bond was noted for being creative and offering a variety of investment options while adhering to the needs of both the issuer and investors. The bond was comprised of three segments: a USD 750 million 6.25% 3-year conventional bond, a USD 1 billion 6.375% 5-year sustainability-linked bond (SLB)¹, and a USD 750 million 10-year 6.5% green bond². The balance of the SLB and green bond in the same transaction drew particular attention for offering something unique to the market.

The SLB, which was a first for a global semiconductor memory manufacturer, has a core environmental-related KPI. By 2026, it aims for at least a 57% reduction in Scope 1 and Scope 2³ greenhouse gas (GHG) emissions intensity⁴ compared to a 2020 baseline.

¹Sustainability-linked bond (SLB): A fixed-income bond tied to predefined ESG objectives that are measured through predefined KPIs. The interest rates of the bond can vary depending on whether the issuer achieves its objectives.
²Green bond: A debt security issued by an organization to finance or refinance projects that are positive for the environment and/or the climate.
³Scope 1 and 2: Scope 1 refers to direct emissions generated in the production stage, while Scope 2 describes indirect energy-related emissions generated in the process of making electricity or steam used in the workplace.
⁴Greenhouse gas (GHG) emissions intensity: The amount of GHG released per production capacity for SK hynix’s semiconductor memory.

Meanwhile, the net proceeds from the green bond have been allocated towards the financing or refinancing of environmental projects outlined in SK hynix’s Green Financing Framework. These include sustainable water and wastewater management, energy efficiency, pollution prevention and control, and terrestrial and aquatic biodiversity conservation.

These bonds play a key role in helping SK hynix reach its sustainability goals, such as reaching net zero emissions by 2050. Its environmental commitments are further highlighted by its status as a founding member of the global Semiconductor Climate Consortium, the first consultative body which targets GHG reductions throughout the semiconductor value chain.

Green Bond Funds a More Sustainable Semiconductor Ecosystem

Figure 2. Allocation by category of the green bond’s USD 750 million proceeds

In addition to being the most popular portion of the triple tranche deal, the green bond has realized significant advancements in SK hynix’s products as well as its environmental efforts. A total of 92.8%, or USD 696 million, of the bond’s total proceeds (USD 750 million) was allocated by the third quarter of 2023, with all of the funds expected to be allocated by the end of 2023 (awaiting confirmation of fourth quarter data).

[Read the 2024 green bond annual report for more information on its impact here]

Figure 3. The green bond’s positive effect on water management from 2020 to 2023

Among the funds, USD 6.90 million was allocated to sustainable water and wastewater management. Efforts included work on a regional municipal water project, construction of a drainage reuse system for a cooling tower, and improvements on a water pollution treatment facility. As a result, the company expects to see an increase in its water reuse rate and a reduction in wastewater discharge.

Figure 4. DDR5 offers reduced power consumption compared to its predecessor

SK hynix allocated its largest portion of the green bond’s proceeds for improving energy efficiency as the company invested USD 681.16 million in realizing significant related advancements in the company’s products. These developments included its industry-leading server DRAM DDR5 achieving a 70% increase in server bandwidth compared to DDR4, while its power consumption decreased by 14.4% compared to the previous generation. The performance per watt of the company’s latest SSD product, PS1010 E3.S, also improved by 85% from the earlier generation PE8110 E1.S.

Figure 5. An ecological park near SK hynix’s Icheon main campus which uses recycled water

A further USD 750,000 was allocated to terrestrial and aquatic biodiversity conservation. These funds supported construction of a large public ecological park near SK hynix’s Icheon campus which stretches the area of nearly four American football fields. At the park, crystal-clear water comes from the campus’ wastewater treatment plant and flows into the Jukdang Stream in Icheon.

Figure 6. Reduction of NOx emissions in tons at the Icheon and Cheongju fabs

Another USD 6.96 million was allocated to pollution prevention and control. The proceeds funded monitoring systems for atmospheric management, infrastructure for nitrogen oxide reduction, and a temperature reduction system in both the company’s Icheon and Cheongju fabs. Consequently, from 2020 to 2023, emissions of nitrogen oxides (NOx) were reduced by around 530 tons in these two major fabs. In addition, air pollutant analysis systems and water quality measurement systems have been installed in the fabs to monitor for environmental problems, minimize environmental harm, and make restoration efforts.

Figure 7. Financial Management Head Hyungmo Yang highlights how the bond supports SK hynix’s environmental goals

“Our triple-tranche bond offers varied investment opportunities while also supporting our sustainability efforts,” said Hyungmo Yang, head of Financial Management. “In particular, the green bond funds environmental innovations such as increased product energy efficiency, improved wastewater management, and pollution reduction. Going forward, the bond’s proceeds will continue to help us meet our environmental goals.”

The post SK hynix Wins IFR Asia Award for Innovative Sustainability Bond first appeared on SK hynix Newsroom.

• Indirect contribution to economy of 7.7853 trillion won, environmental performance of business activity of -1.0423 trillion won, social performance of business activity of 841.5 billion won
• Indirect contribution to economy decreased by industry downturn, social performance increased by enhanced company culture
• First SK affiliate to conduct partner SV measurement, created 1.4698 trillion won of social value from 13 partners
• “Devote to enhance social value, ESG management capabilities in the semiconductor ecosystem”

Seoul, June 12, 2023

SK hynix Inc. (or “the company”, www.skhynix.com) today announced that it generated 7.5845 trillion won in social value last year.

SK hynix’s generation decreased by 20% in 2022 from 9.4173 trillion won recorded in 2021. By category, indirect contribution to economy totaled 7.7853 trillion won, while environmental performance of business activity recorded a negative 1.0423 trillion won and social performance of business activity reached 841.5 billion won.

Indirect contribution to economy decreased 20% from a year ago due to the decrease in tax payments by semiconductor industry downturn from last year. However, SK hynix devoted 37% of SK group’s total indirect contribution to economy which accounts approximately 20.8000 trillion won.

Social performance of business activity increased 29% from a year ago due to the improvement in ‘life quality of employees’ and the expansion of support for partner companies. Last year, SK hynix implemented various benefits such as ▲Happy Friday ▲Increase in parental leave ▲Family friendly vacation system to balance work and life of employees.

In addition, the company’s efforts to vitalize the domestic semiconductor ecosystem by fostering ‘technological innovative companies’ every year and strengthening technological cooperation to localize material and equipment contributed to social performance of business activity.

In the area of environment, however, negative impact increased by 9%. “As semiconductor production increased last year with company’s all-time high annual revenue, resource consumption and greenhouse gas emission naturally increased. But, such negative result was somewhat offset by development of low-power products, adoption of greenhouse gas reduction facilities and renewable energy migration including Green Premium System,” the company said.

Meanwhile, SK hynix expanded the measurement scope of social value to supply chain for the first among SK group affiliates. This is due to company’s judgement that creating SV and enhancing ESG management capabilities in the entire ecosystem beyond the company was essential to fulfill various ESG reinforcement demands from domestic and global stakeholders.

“As a result of consulting with 13 partners* in various industries, including material, equipment, logistics and environmental service, a total of 1.4698 trillion won social value was created in 2022. With this year’s evaluation, it is meaningful that partners have set up self-sustaining management system for SV and ESG data,” the company said.

*Included partners: DAEDUCK ELECTRONICS Co., Ltd /Dong Woo Fine-Chem Co., Ltd./MiCoCeramics Ltd./Veolia Industrial Development Korea/SIMMTECH Co., Ltd./WONIK Materials Co.,Ltd./WONIK HOLDINGS CO.,LTD./Eugene Technology Co.,Ltd./ KCTECH CO., LTD/ KoMiCo Ltd./ Techwing, Inc./ PNS Logis Co.,Ltd./ Hana Micron INC.

The partners above agreed that they would continue to put efforts onward to create more social values by upgrading the management system.

Kim Youn-wook, Vice President for Corporate Sustainability Management at SK hynix, said, “the company will continue to work together with various stakeholders, including its partners, to have positive impact in the semiconductor ecosystem and the society.”

About SK hynix Inc.

SK hynix Inc., headquartered in Korea, is the world’s top tier semiconductor supplier offering Dynamic Random Access Memory chips (“DRAM”), flash memory chips (“NAND flash”) and CMOS Image Sensors (“CIS”) for a wide range of distinguished customers globally. The Company’s shares are traded on the Korea Exchange, and the Global Depository shares are listed on the Luxembourg Stock Exchange. Further information about SK hynix is available at www.skhynix.com, news.skhynix.com.

Media Contact

SK hynix Inc.
Global Public Relations

Technical Leader
Minseok Jang
E-Mail: global_newsroom@skhynix.com

Technical Leader
Kanga Kong
E-Mail: global_newsroom@skhynix.com

Technical Leader
Joori Roh
E-Mail: global_newsroom@skhynix.com

The post SK hynix Generates 7.6T Won in Social Value in 2022 first appeared on SK hynix Newsroom.

SK hynix Inc. (or “the company”, www.skhynix.com) today announced that it generated 9.4173 trillion won in social value last year. Based on the calculations of SK Group’s social-value tracking methods, SK hynix’s generation surged by 93% in 2021 from 4.8887 trillion won recorded in 2020. The company’s performance represents more than half of 18.4 trillion won that the entire SK Group generated in social value last year.

By category, indirect contribution to economy such as tax payments, employment, and dividends totaled 9.7201 trillion won, while environmental performance of business activity recorded a negative 952.7 billion won and social performance of business activity reached 649.9 billion won.

In particular, indirect contribution to economy increased by 81%, or 4.3465 trillion won, from a year ago, helped by the company’s all-time high revenues in 2021. Social performance of business activity also rose by 44%, or 198.5 billion won, on the back of efforts to vitalize the semiconductor ecosystem and expanded philanthropic contributions for the underprivileged. But with increased greenhouse gas emissions as a result of more production to meet stronger demand for semiconductor globally, the negative impact grew by 2%, or 15 billion won, in the area of the environmental performance of business activity.

Indirect contribution to economy increased across all categories of tax payments, employment, and dividends. Tax payments soared 160%, or 2.3633 trillion won, on year as the company reported stronger financial results. A rise in the number of employees and bigger compensation package also led to an increase of 56%, or 1.7245 trillion won, in the employment category. Dividends rose by 32%, or 258.6 billion won, as the company implemented a more aggressive shareholder return policy.

In the area of environment, the company reported a negative reading for a second straight year as more resources were consumed to produce more semiconductors, also resulting in a gain in greenhouse gas emission. More precisely, negative cost increased by 3%, or 24.2 billion won, from a year ago, in the area of resource consumption/environmental pollution. Such negative result was somewhat offset by an increase of 128%, or 9.1 billion won, in the product/services segment with development of low-power products.

“SK hynix has been making efforts in various aspects, joining the Green Premium System, trying to reduce greenhouse gas emissions and expanding reuse of wastewater in order to lessen the environmental impact,” the company said. “But whatever the reasons are, we are still responsible for the impact we had on the environment. We will continue to aim for an improvement in the environment area and make endless efforts.”

*Green Premium System: A pricing system whereby a consumer of electricity pays an additional premium on existing electricity costs in order to use power from renewable energy sources

In the category of the social performance of business activity, shared growth showed the most remarkable improvement. SK hynix has for years continued its efforts to vitalize the semiconductor ecosystem by consistently providing technological support and training opportunities to its business partners. SK hynix has also contributed to localization of materials, parts, and equipment through joint technological development with its partners. As a result, shared growth performance rose by 56%, or 180.6 billion won, from a year ago.

Elsewhere, the company saw a growth of 9%, or 9.7 billion won, in the social contribution area as it continued relevant activities in a socially distanced manner during the pandemic. The performance for “life-quality improvement for the underprivileged” increased by 45%, or 8.2 billion won, thanks to its continued support for social enterprises.

Kim Youn-wook, Vice President for Corporate Sustainability Management, said that SK hynix has been communicating with relevant stakeholders transparently, making public its social value performance for the past 4 years since 2019. “We will speed up implementation of the SV2030, our mid- to long-term initiative for social-value generation, and advance our ESG management commitment further with an aim to contribute to the mankind and the community.”

*Specific examples of social value generation and detailed calculation methods can be found from the SK hynix newsroom.

About SK hynix Inc.

SK hynix Inc., headquartered in Korea, is the world’s top tier semiconductor supplier offering Dynamic Random Access Memory chips (“DRAM”), flash memory chips (“NAND flash”) and CMOS Image Sensors (“CIS”) for a wide range of distinguished customers globally. The Company’s shares are traded on the Korea Exchange, and the Global Depository shares are listed on the Luxembourg Stock Exchange. Further information about SK hynix is available at www.skhynix.com, news.skhynix.com.

Media Contact

SK hynix Inc.

Global Public Relations

Technical Leader

Kanga Kong

E-Mail: global_newsroom@skhynix.com

Technical Leader

Jaehwan Kevin Kim

E-Mail: global_newsroom@skhynix.com

The post SK hynix Generates 9.4T Won in Social Value in 2021 first appeared on SK hynix Newsroom.

SK hynix Inc. (or ‘the Company’, www.skhynix.com) announced its achievements in creating social value (SV) in 2020. Since 2019, major affiliates of SK Group have been quantifying and announcing the SVs created in the previous year in three areas of “achievements in indirect contribution to the economy”, “business achievements in social performance”, and “achievements in social contribution”.

SK hynix’s achievements of SV last year in the three areas are as follows: KRW 5,373.7 billion for “achievements in indirect contribution to the economy” including tax payment, employment, and dividends; KRW -596.9 billion for “business achievements in social performance” including social (labor/shared growth) and environmental fields; and KRW 110.6 billion for “achievements in social contribution” including donation and social contribution activities.

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The achievements in indirect contribution to the economy has increased by 32% (KRW 1,314.3 billion) compared to the previous year as the semiconductor business conditions improved from last year. The business achievements in social performance, however, the negative amount has increased by 11% (KRW 57.1 billion) year on year due to environmental impacts such as greenhouse gas emissions. Meanwhile, the amount of achievements in social contribution has increased by KRW 41.3 billion mainly due to intensive support for overcoming COVID-19.

Looking into each area more specifically, the Company announced that the achievements in indirect contribution to the economy have shown meaningful results in all sectors of tax payment, employment, and dividends. Firstly, the amount achieved in the tax payment sector has significantly increased by 211% compared to the previous year. Also, SK hynix reached the quota employment rate for the disabled (3.1% for private companies with 50 or more employees at all times) in 2020, achieving results in terms of employing the vulnerable. In terms of dividends, the achievement amount has increased by 17% year on year. SK hynix expects that the achievements in indirect contribution to the economy will continue to grow with the clear signs of improvements of the industry conditions this year.

Business achievements in social performance incurred the negative costs of KRW 944.8 billion in the environmental sector, increased by KRW 127.2 billion from 2019. SK hynix explained that this is due to the characteristics of the semiconductor industry, which consumes large amounts of water and electricity and emits greenhouse gases during the manufacturing process. An official from SK hynix said, “As a result of efforts such as recycling resources across the company, the amount of greenhouse gas emissions per unit production has decreased. However, the Company feels regrettable to its stakeholders that total amount of emissions have increased. SK hynix will focus on reducing the total amount of greenhouse gas emissions by making efforts in various fields such as environmental technology development to reduce adverse environmental impacts.”

Nevertheless, SK hynix has shown the increase of 21% year on year by KRW 322.4 billion in social sector and 116% year on year by KRW 25.5 billion in the products/services sector, partially improving the negative result in overall environmental sector. The Company has strengthened support for its partners by operating “the Technology Innovation Company program” and “the analysis and measurement support center” to foster localization of materials, parts, and equipment. Also, the Company has expanded the supply of low-power products including SSDs that drastically reduce carbon dioxide emissions.

SK hynix has recorded a 60% increase year on year by KRW 110.6 billion in achievements in social contribution. Throughout last year, SK hynix continuously strived to contribute to overcoming the COVID-19 crisis. The Company showed its support to medical staff and provided smart devices necessary for remote learning for children from low-income families in order to build a social safety net.

SK hynix plans to concentrate the company-wide capabilities on “SV 2030”, announced in January this year as the company’s mid- to long-term plan for SV creation. Through this, the Company aims to achieve key goals including becoming net zero by 2050, vitalization of the semiconductor ecosystem, establishment of a social safety net, and internalization of a corporate culture based on diversity and inclusion.

In particular, as the first company to join RE100* in the semiconductor memory industry, SK hynix has shown its strong will to actively make improvements in the environmental field through various efforts such as minimizing greenhouse gas emissions, reducing waste, and expanding water resource recycling in the semiconductor manufacturing process. In addition to this, the Company plans to continue its efforts to replace the existing storage device, HDD, with low-power SSD to expand environment-friendly technology.

*RE100: Declaration to cover 100% of the company’s electricity us with renewable energy by 2050

Kim Youn-wook, Vice President for Corporate Sustainability Management of SK hynix said, “SK hynix has been raising the objectivity and reliability in measuring its performance by announcing the company’s social value achievements for three consecutive years. We also will keep seeking ways to contribute to humanity and society by increasing the scale of social value creation while strengthening ESG management at the same time.”

※ Reference: The purpose and future plans of SK’s social value measurement announcement

Since 2019, SK Group measures the social values created in the previous year based on the ‘Double Bottom Line (DBL) Management’ that pursues both economic value (EV) and social value (SV) and publishes the results every year.

Over the past three years, SK has achieved promising results in the products and services areas, such as displaying meaningful social value creation achievements, and expanding employment of socially vulnerable groups. Nevertheless, SK self-evaluated that the innovation of business model (BM) based on social values has not yet ridden the track, and that a breakthrough effort to drastically reduce greenhouse gas emissions is still necessary.

SK, which is implementing a financial story based on ESG, plans to actively connect its social value measurement with its ESG management, by reflecting social value measurement result in management strategies and decision-making of SK’s affiliates. It also plans to increase the reliability of measurement by transparently disclosing the greenhouse gas measurement index and formula to external stakeholders.

Meanwhile, the quantitative measurement of ESG performance is also spreading globally. The Value Balancing Alliance (VBA), launched by SK with more than 20 global companies and organizations such as BASF and Novartis in order to develop a global measurement model, is currently expanding its influence by collaborating with the International Financial Reporting Standards (IFRS) and the World Economic Forum (WEF), and Harvard Business School (HBS). SK plans to lead the global standardization of social performance measurement by strengthening cooperation with these organizations.

About SK hynix Inc.

SK hynix Inc., headquartered in Korea, is the world’s top tier semiconductor supplier offering Dynamic Random Access Memory chips (“DRAM”), Flash memory chips (“NAND Flash”) and CMOS Image Sensors (“CIS”) for a wide range of distinguished customers globally. The Company’s shares are traded on the Korea Exchange, and the Global Depository shares are listed on the Luxemburg Stock Exchange. Further information about SK hynix is available at www.skhynix.com, news.skhynix.com.

Media Contact

SK hynix Inc.
Global Public Relations

Technical Leader
Jaehwan Kevin Kim
E-Mail: global_newsroom@skhynix.com

Technical Leader
Eun Suk Yixi Lee
E-Mail: global_newsroom@skhynix.com

Technical Leader
Sejin Julia Yoo
E-Mail: global_newsroom@skhynix.com

The post SK hynix Announces 2020 Social Value (SV) Achievements first appeared on SK hynix Newsroom.

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That is why we are launching a new editorial series titled “Employee Spotlight”, where we will champion different SK hynix employees around the globe around a variety of topics. In celebration of Earth Month, we are highlighting employees old and new, who have contributed to building our ESG practice and looking where the future could lead for other members at SK hynix.

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The Way I See It: Seongbong Cho (Social Value Strategy / Project Leader)

Tell us about Social Value at SK hynix: “Social Value (SV) pursuit is all activities that pursue the happiness of stakeholders. In other words, it is SK’s strategy to earn their trust and support by meeting the SVs of customers, society, shareholders, and BP, and lead to increased EVs in the mid to long term.”

Highlights of the job: “My team established and organized the company-wide DBL promotion system (DBLMS) and systematized the SV Account concept and implemented empirical measurement for the first time.”

Most memorable volunteer experience: “In 2014, we recruited members of affiliates during a heavy snowfall in the mountains of Gangwon-do to support a village isolated from snow. I have fond memories of SK hynix employees working very hard during that time.”

How is SK hynix tackling environmental issues: “To address climate change, SK hynix declared RE100 last year and will do its best to use renewable energy while growing. In addition, we are minimizing the increase in energy use caused by our products by continuously increasing the energy use efficiency of our products.”

What’s next for ESG at SK hynix: “It is my hope that our company’s SV/ESG activities will be firmly established as a management system with tangible results, becoming the global top tier company in the industry and being used as a case for business schools.”

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The Way I See It: Saeyoung Lee (ESG innovation / Team Leader)

Highlights of the job: “I am a team leader of ESG Innovation Team. I am in charge of establishing/implementing strategies for the ‘S’ part of the ESG, discovering new tasks, and responding to DJSI evaluation agencies (e.g., improving supply chain ESG/conflict minerals, establishing a human rights management system, etc.)”

Proudest moment: “I established a JEM (job exposure matrix) system and the first cohort in Korea to prevent occupational diseases (leukemia, etc.) in the SHE organization, and established a leading model for corporate occupational health through the Industrial Health Advancement Committee (Labor-Management Council).”

Key to good company culture: “First of all, communication and transparency based on the trust of a horizontal relationship seem to be necessary, and this is considered a positive factor for external relationships as well.”

How employees are contributing to ESG: “All executives and employees would like to contribute to enhancing corporate value through work, but I believe that through ESG connection, we can continuously maximize corporate value by securing both economic value and stakeholder’s trust.”

What’s next for ESG at SK hynix: “I hope that SK hynix’s passion of ESG management will lead to empathy and cooperation based on the trust and support of internal and external members and stakeholders. Through this, SK hynix will achieve the status of a truly global top-tier ESG company.

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The Way I See It: Jaeho Lee (ESG Strategic Planning / Team Leader)

Key to good company culture: “Two-way communication based on empathy.”

Biggest environmental challenge in the industry: “The semiconductor industry produces high-tech products through continuous technological development – but this comes at the environmental cost of increased energy consumption and generation of harmful substances.”

Biggest ESG issue ICT companies are facing: ICT companies are based on information that comes out through efficient processing of large amounts of data. At this time, the necessary parts and systems are based on a large amount of power consumption, and the demand for suppression of carbon emissions is increasing.

SK hynix’s ESG approach: “SK hynix is working to reinforce ESG value through a development strategy that minimizes these negative aspects when developing technology. We are striving to reduce power use in the system by expanding the use of renewable energy through the declaration of participation in RE100 and developing low-power semiconductors.”

What’s next for ESG at SK hynix: “I want to create a system where ESG elements can be reflected when making any decision that is necessary for business and management. I believe that our company can pursue more stable growth in the mid to long term if ESG factors are reflected in the values pursued by the field.”

The post Introducing the SK hynix Employee Spotlight Series first appeared on SK hynix Newsroom.

If you are more interested in SK hynix’s commitment to ESG, please check out below articles.
 ● ESG, a new perspective for companies: how far has SK hynix come?
 ● SK hynix starts ESG Management in earnest by recruiting an industry expert

The post SK hynix’s Comittment to ESG first appeared on SK hynix Newsroom.

Especially, at the beginning of this year, SK hynix issued a “green bond” with a value of USD 1 billion to accelerate its ESG management, for the first time among the global memory semiconductor companies. Green bonds are a type of bond with a special purpose, limited to use only to fund environmentally friendly projects. SK hynix also presented its blueprints of carrying out various eco-friendly projects with the funds secured through this bond to strengthen its position as an eco-friendly company.

The newsroom team met key personnel in charge of issuing the green bond, including Head of Finance Management Hyungmo Yang, Project Leader (PL) of Financial Solution Je Woo Heo, and Technical Leader (TL) of Financial Solution Jae Han Park. Through the interview, the newsroom team could hear about the background and the process of SK hynix’s issuance of the green bond, as well as various future eco-friendly projects led by SK hynix using the funds.

The Era of “Social Responsibility” of Companies: Increase in the Issuance of the “ESG Bonds”

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ESG bonds refer to bonds with a special purpose issued to raise the funds for socially responsible investment, such as improving the environment, society, and governance. Although there is no accredited standard internationally unified, the standards of the International Capital Market Association (ICMA) and the Climate Bonds Initiative (CBI) are followed in general.

ESG bonds can be divided into the following types according to the purpose and scope of use: “green bond” issued for eco-friendly projects; “social bond” issued to solve social problems, such as job creation, support for the vulnerable, and social infrastructure establishment; and “sustainability bond” where the green bonds and social bonds are combined, for the use for more varied purposes.

Head of Finance Management Hyungmo Yang said, “As the importance of ESG has been highlighted worldwide, interest in ESG bonds for investment in related fields has increased as well. While the conventional management method was focusing on financial performance, the recent method, especially as the company size grows, is emphasizing the level of expectations from stakeholders and the company’s sustainability. This has led to an era where more attention is paid to ESG to actively solve social problems.”

In particular, the basic trend among investors is changing. The United Nations Principles for Responsible Investment (UNPRI)³ announced by the UN in 2006 reflected the ESG issue, making it public worldwide and steadily increasing the proportion of investments focused on ESG. Larry Fink, CEO of BlackRock Inc., the world’s largest asset management corporation highlighted environmental sustainability in his 2021 letter to CEOs, saying that climate risk is investment risk and consistent and improved disclosure of major data should be accessible to assess such risk.

According to statistics from the Global Sustainable Investment Alliance (GSIA), the amount invested in ESG globally in 2018 recorded USD 30,680 billion, showing a three-fold increase compared to 2012. By investment assets, ESG bonds accounted for 36% of the total ESG investment assets, which is the second-largest portion following the stocks (51%). This trend is apparent in Korea as well. As of May 2020, ESG bonds of 413 types and a total of KRW 59 trillion worth were issued, increased by more than 65 times compared to the end of 2018. Issuing companies are also expanding from public corporations and the banking sector to private companies and the secondary banking sector.⁴

From the perspective of investors, ESG bonds have the advantage of ensuring the stability of investment since the details of the fund use are disclosed transparently, as well as solving the stakeholders’ pain points, that is, social problems. Moreover, from the perspective of companies, ESG bonds allow them to raise the funds necessary for the ESG management stably, and these activities are also used as corporate evaluation factors, enhancing the brand value. As there are advantages in both supply and demand, it is expected that the size of ESG bond issuance will continue to increase further.

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Among the ESG bond types, green bonds have the highest proportion. According to SK Securities, green bonds accounted for about 63% of the entire global ESG bonds as of 2020, while social bonds and sustainability bonds accounted for 23% and 14% respectively. The amount of green bond issuance is expected to increase continuously. According to the CBI, it is expected that the scale of the global green bond issuance will greatly increase from USD 269.5 billion in 2020 to USD 400 billion to 450 billion.⁵

Why are green bonds accounting for a large portion of the ESG bonds? This is mainly because the international community’s interest has increased with the intensified concerns about climate change. Many countries are competitively presenting eco-friendly policies such as greenhouse gas reduction to solve global issues. In line with this, companies have also joined in the action for a sustainable planet. Global companies are now promoting various eco-friendly projects, using green bonds as a means of raising funds for the projects.

The environment sector is also a field where the project performance can be displayed most visibly among the ESG. TL Jae Han Park said, “In the case of projects for the social and governance fields, it is difficult to express the effects quantitatively. For the environment field, however, it is relatively easy to measure the effects with various indicators such as greenhouse gas reduction, energy savings, and pollution degree. This enables preparing a relatively clear framework⁶, providing the numbers and figures that investors want to see, in an intuitive way.”

SK hynix Issues a USD 1 Billion Green Bond for its “Eco-Friendly Projects”, Accelerating the ESG Management

Recently, SK hynix also joined this trend and issued a green bond to invest in eco-friendly projects, as one of the measures to accelerate its ESG management. This is to inform global investors of various eco-friendly projects currently led by SK hynix such as fab construction and operation, as well as to enhance its reputation as an eco-friendly company.

For the issuance of a green bond, SK hynix prepared a framework to review the eligibility of eco-friendly projects by collaborating with financial, ESG, and environmental organizations. The eligibility of the green bond was evaluated by a third-party verification organization called “Vigeo Eiris”⁷. Since the work after the issuance is also important especially for a green bond, SK hynix plans to organize and operate a “Green Bond Working Group” with relevant departments.

Head of Finance Management Hyungmo Yang

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The evaluation result was very positive. The result was the “Robust” grade, which is the second-highest among the four grades of Advanced, Robust, Limited, and Weak. This means that the environmental improvement impact of the eco-friendly projects included in the framework is clear and the investment decision-making process is well established. Head of Finance Management Hyungmo Yang said, “Green bond eco-friendly projects are selected and the investment decisions are made through the ‘ESG Management Committee’, the highest decision-making body related to the company’s ESG activities. Vigeo Eiris also evaluated that companies with this kind of system are rare.”

SK hynix held an investment briefing and proceeded with the procedures for the issuance in earnest. Initially, the company planned to raise orders worth around USD 500 million with a maturity of 10 years, but orders of USD 5.4 billion from over 230 institutional investors from around the world were made, allowing the company to succeed in raise orders over five times the amount issued. In the end, SK hynix could issue a green bond of USD 1 billion worth, beyond the issuance scale originally targeted.

TL of Financial Solution Jae Han Park

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Despite the bond’s maturity of 10 years, which can be burdensome for investors, how could the bond attract so many orders beyond the expectations? TL of Financial Solution Jae Han Park said, “Earlier this year, SK hynix declared ‘Social Value 2020’. At the same time, it seems that the company’s sincerity to implement its ‘Financial Story’, which is SK hynix’s vision to contribute to humanity and society by strengthening the ESG management, while pursuing a balanced growth of DRAM and NAND Flash businesses at the same time. This seems to be the result of the investors’ recognition for the company’s long-term growth potential, Green 2030⁸ project, and consistent movements for the environment continued for long, such as joining the RE100⁹ for the first time in Korea.”

PL of Financial Solution Je Woo Heo

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The memory semiconductor business, the so-called “smokestack industry”, consumes a lot of energy and toxic raw and subsidiary materials, making it perceived as an industry far from eco-friendliness. SK hynix, however, succeeded in issuing a green bond for the first time among global memory semiconductor companies, breaking such stereotypes and securing the initiative as an eco-friendly company.

PL of Financial Solution Je Woo Heo evaluated this by saying, “The issuance of a green bond this time is an important turning point where SK hynix secured a driving force for maintaining the initiative as an eco-friendly company.” He also said, “We will continue to pursue the right direction as an eco-friendly company by discovering many eco-friendly items and actively carrying out related projects, based on the ESG management philosophy.”

“Sustainable Growth as an Eco-friendly Company through the Green Bond and Expectation to Spread Good Influence in the Semiconductor Industry”

How and where will SK hynix use the funds secured by the green bond? SK hynix plans to use the funds to carry out projects in various fields including sustainable water quality control, energy efficiency improvement, pollution prevention, and ecological environment creation. Each of these project fields was selected in consideration of the characteristics of the semiconductor industry where a large amount of energy and water is consumed and the resulting environmental impact.

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Firstly, for the “Sustainable Water Quality Control” project, the company plans to continue to invest in treatment facilities for recycling a large amount of water used in the production process as well as wastewater treatment plants to upgrade them. As water is used the most in the semiconductor production process, investment in water treatment accounts for a high proportion of the overall project. Also, the company plans to create various social values related to “water” by supplying clean water to local communities where SK hynix’s business sites are located through wide-area water supply projects.

Secondly, the “Energy Efficiency Improvement” project seeks ways to use energy more efficiently through product development, equipment replacement, work environment optimization, and so on. In particular, reducing greenhouse gas emissions through the development of low-power solid-state drives (SSDs) is the key task. The power consumption of low-power SSDs is 94% less than that of hard disk drives (HDDs). If HDDs in data centers around the world are replaced with low-power SSDs, greenhouse gas emissions are expected to be reduced by more than 40 million tons by 2030.

Thirdly, the “Pollution Prevention” project is to contribute to the reduction of pollutants through the establishment of nitrogen oxide (NOx) reduction infrastructure and reduction of environmental pollutants. For this project, the establishment of an environmental analysis system that can test in advance whether harmful substances are generated from raw and subsidiary materials was selected as a key task.

Lastly, the “Ecological Environment Creation” project aims to contribute to the conservation of terrestrial and aquatic ecosystems through the creation of ecological parks. The ecological parks are expected to provide a space for locals to enjoy leisure activities. Moreover, even if wastewater is leaked out due to an unexpected accident, the wastewater will be induced to flow into the water storage tank (a device installed to collect rainwater, sewage, or wastewater) located in the ecological park so that it can serve as a protective device for the environmental safety.

In the implementation process of each project, various departments will collaborate organically through the “Green Bond Working Group” to closely examine the business feasibility and environmental improvement effects of the eco-friendly project. At the same time, the “ESG Management Committee” plans to decide whether to promote a project and execute the investments raised through the green bond. Also, through a follow-up report, the usage of the funds, the following results, and the unallocated fund amount will be transparently disclosed annually on the SK hynix website.

PL Heo said, “Although it is a 10-year maturity bond, it is expected that all funds will be used within three years, considering investors’ expectations and project implementation plans.”

SK hynix plans to commit itself to create social values and pursuing the happiness of stakeholders through ESG management. Also, the company is establishing a plan to secure additional funds for this plan. A green loan¹⁰ can be implemented by using the green bond framework at the moment, and there is a possibility of additionally issuing a social bond or sustainability bond.

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Lastly, the newsroom team heard about the future that SK hynix is drawing up through various eco-friendly projects mentioned earlier.

“The ultimate goal is to develop into a company that pursues the happiness of stakeholders while creating social values at the same time, not simply pursuing economic profits. A company where each of its employees discovers the possibilities of creating ESG in their tasks and participates in the related activities voluntarily and a company that achieves sustainable growth by running ethical and eco-friendly businesses are the future that SK hynix is aiming for. To achieve this, we will continue to discover and promote projects suitable for ESG management.”

¹Financial Story: SK Group’s new management strategy to increase the total value that includes corporate value by presenting the growth strategy and future vision of each subsidiary company of SK to various stakeholders such as customers, investors, and the market, generating trust and sympathy. SK hynix has established and initiated in earnest its Financial Story to contribute to humanity and society by strengthening ESG while pursuing continuous business growth through DRAM and NAND as two main pillars.
²ESG: An abbreviation for the environment, social, and governance, which stands for a standard for determining a company’s non-financial performance; it is not imperative to do good things, but an empirical standard of improving corporate sustainability by pursuing ESG. The term ESG was first introduced in “Who Cares Wins: Connecting Financial Markets to a Changing World”, a report used in a letter in 2004 by the UN Secretary-General Kofi Annan to 50 CEOs of global investment institutions in order to request their participation in the UN Global Compact. In January 2005, at a conference co-hosted by the UNGC, the World Bank Group (WBG), and the Government of Switzerland, the term ESG appeared with the presentation “Who Cares Wins: Investing for Long-Term Value”.
³United Nations Principles for Responsible Investment: Principles of investing in companies exerting a positive influence on the environment (E) or society (S), or companies with excellent corporate governance (G)
⁴Recent Global ESG Investment and Policy Trends, Jung-sun Ryu, Korea Financial Investment Association (KOFIA) (June 2020)
⁵Source: https://www.climatebonds.net/2021/01/record-2695bn-green-issuance-2020-late-surge-sees-pandemic-year-pip-2019-total-3bn
⁶Framework: Report on the use of invested funds and expected effects of the investment
⁷To issue a green bond, it is necessary to go through a procedure for the evaluation of the eligibility of the green bond by a verification organization specialized in green bonds; although no laws and standards are stipulating the requirements, the “Green Bond Principles (GBP)” of the International Capital Market Association (ICMA) or the “Climate Bond Standards” of the Climate Bonds Initiative (CBI) are followed in general.
⁸Green 2030: Plan in the environmental sector among the SK hynix’s mid-to-long-term plan “SV 2030” roadmaps to maximize the social value creation, with a goal to be achieved by 2030
⁹RE100: Renewable Energy 100; Convened in 2014 by The Climate Group, a non-profit organization headquartered in the UK, RE100 is an initiative of businesses committed to 100% renewable electricity, and over 280 companies around the world are joining this initiative (as of 2021)
¹⁰Green loan: Loan instruments made available exclusively to finance eco-friendly projects and eco-friendly infrastructure businesses, such as new and renewable energy and electric cars

The post SK hynix Issues USD 1 Billion Green Bond: How Will the Investment Be Used? first appeared on SK hynix Newsroom.

As a forward-looking company, we are always growing and looking to the potential of tomorrow, and the day after that. This applies to our vision for social value as well. To guide our trajectory over the next decade, SK hynix has announced SV 2030, a roadmap for maximizing social values across the company. Organized across four core areas of Environment, Shared Growth, Social Safety Net, and Corporate Culture, the ambitious project will aim to meet specific goals in each sector by 2030.

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A newly established Environmental, Social, Governance (ESG) Management Committee will convene on a quarterly basis to oversee the progression of our SV 2030 goals. This progress will be reported yearly in our annual sustainability management reports.

In his 2021 New Year’s speech, SK Chairman Chey Tae-Won emphasized the importance of this moment for the company: “It is a time when we need a new entrepreneurial spirit to empathize with society and work together to solve problems.”

Environment – Green 2030

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Environmental issues are a global concern – they affect us all, the planet we live on, and the air that we breathe. That’s why we care about the way in which our products are made, manufactured and treated. No matter the importance of a certain product, we believe its economic value must equal its social value.

Through Green 2030, SK hynix will join companies like Apple in achieving the RE100 benchmark by 2050, and thrive to achieving net zero (by 2050), zero additional emissions of air pollutants, a gold rating at ZWTL at its domestic production sites. Also, by advancing an eco-friendly semiconductor manufacturing system and increasing water reuse up to 3 times, we aim to contribute to a healthy planet that will continue to support future generations for years to come.

Shared growth – Advance Together

When our company succeeds, we all succeed. SK hynix aims to increase the competitiveness of the Korean semiconductor industry by enhancing the capabilities of our partner companies including suppliers of semiconductor materials, components, and equipment. As semiconductors have a profound impact on the national economy, we believe that revitalizing the semiconductor ecosystem through partnerships can reinvigorate our economy.

To this end, we will achieve KRW 3 trillion in cumulative investment in technological cooperation for business partners. We will sequentially invest KRW 1.2 trillion in the establishment and operation of a ‘We Do Tech Center,’ operated as SK hynix’s flagship semiconductor ecosystem platform. In addition, it will expand and implement a win-win growth program, including support for technologically innovative companies, industry-academia, and national projects.

Social Safety Net

A social safety net is an infrastructure to establish the role of companies in preparation for crisis situations such as pandemics or natural disasters, and to enhance their capabilities to solve social problems. We plan to create a system of roles that companies should perform in emergency situations and create a separate fund to implement them. We will also invest in the specific needs of the local communities where our production bases are located.

Building a healthy social safety net is no mean feat, but SK hynix has managed to do just that thanks to its tireless work for local communities made possible by its kindhearted employees. Our main goal is supporting those who need it the most, like low-income families and the elderly. This is why SK hynix America founded the VOICE (Valuable Opportunities for Interaction, Collaboration, and Engagement) initiative which allows its employees to do their bit for the local society through food bank volunteering, toy and backpack drives, fundraisers, and events supporting important social movements and celebrations like International Women’s Day. To assist elderly locals, the company set up a social contribution program that already benefits 100,000 people who are not familiar with modern technologies like using unmanned convenience stores.

SK hynix is helping communities in numerous ways. Take its job creation track record as a perfect example, is aiming to create 1,000 jobs for people with disabilities and encouraged more than 100,000 to participate in a its global ICT human resource development program. And SK hynix did not shy away when the pandemic struck the globe in early 2020, its US division donating an incredible 50,000 masks to medical workers around San Jose, California, where its HQ is based.

In the future, SK hynix plans to create a system of roles that companies should perform in emergencies and create a separate fund for this.

As we have seen through the COVID-19 pandemic, crises such as these tend to impact the weakest places in society. That’s why SK hynix plans to actively support the vulnerable against the threat of public safety, health and livelihood.

Corporate Culture – Diversity and Inclusion

SK hynix’s working culture continuously evolves, the company focusing on improving the happiness of its employees by providing a level playing field for all and the opportunity to grow as people and professionals. To foster an effective learning environment, we encourage employees with 200 hours of self-development education on top of insightful diversity training that promotes equal opportunities. The company is also making efforts to establish gender-balanced workforce, with a commitment to guarantee leadership-nutruring training programs for female employees twice the number of current female managers.

At SK hynix, the purpose of corporate management is to ensure the happiness of its members. We are committed to promoting a diverse and inclusive corporate culture where self-development is encouraged and supported.

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Our goal is to create a truly inclusive, vibrant community where all voices are lifted up and celebrated. To achieve this, we will implement education trainings on diversity and inclusion topics, expand our female recruitment rates, and reinforce our female leader training programs.

Your Questions Answered

Curious to hear even more? We’ve answered some of the top questions about our SV 2030 commitment below.

Q: What are we doing to become Net Zero by 2050?
A: A total of 13 million tons CO2 will be saved by 2030. Specifically, 6.5 million tons of CO2 emissions will be reduced  through domestic RE certification using green tariff plans and PPA, RE100 for Chinese business sites, and participation in carbon reduction projects in developing countries. Another 6.5 million tons will be saved by promoting CO2 reduction by supplying low-power semiconductors (detailed measurement methodology being developed).

Q: What are the air pollutants we’re concerned with? How much are we emitting?
A: Sulfur oxide, nitrogen oxide, dust, fluorine, ammonia, hydrogen chloride, formaldehyde (VOCs), etc. According to our Sustainability Reports, we emitted about 690 tons in 2020 and about 650 tons in 2019.

Q: What are we doing to expand waste recycling?
A: Enhancement of the actual recycling rate of designated wastes, promotion of heat recovery and reuse of incineration waste, reinforcement of waste resource recycling efforts, etc.

Q: What are some of the representative water resource saving activities?
A: There is a case of a water-free scrubber that breaks the common sense of conventional scrubbers that purify harmful gases with water and treats high-temperature gas with an indirect cooling method to save water and costs with a waterless scrubber.

Q: Is the ESG Management Committee a regular meeting body led by the CEO?
A: As the recent emphasis on ESG management continues, it is a new meeting body led directly by the CEO, and mid- to long-term ESG-related policies and strategic decisions are made.

Q: What is the status of RE100 declaration in the semiconductor industry?
A: In July 2020, Taiwan’s TSMC declared that it would achieve RE100 by 2050. SK hynix is the first among semiconductor memory companies to do so.

Q: Are there any plans for cooperation with partner companies as well as customers in the future related to RE100?
A: Many global clients have already declared and implemented RE100 and are requesting cooperation from our company in the supply chain to achieve their environmental goals. In the future, we will continue to maintain cooperation from the viewpoint of social value, and we will support environmental management of business partners through the ECO Alliance, etc.

The post SK hynix Announces SV 2030: A Long-Term Vision for Social Value first appeared on SK hynix Newsroom.

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SK hynix employed the expert of relevant field as an executive to speed up ESG management.

Bangsil Lee, who has been working on the creation of knowledge content as a journalist specializing in business management at Dong-A Business Review (DBR), is an expert in the fields of creating shared value (CSV), social impact, and sustainable management. Through the 2017 book “Big Profit”, Bangsil Lee, as a co-author, introduced a new growth model for companies that can generate profits while solving social problems at the same time. Lee holds an MBA from the Fuqua School of Business at Duke University and a Ph.D. in engineering from the Technology Management, Economics, and Policy Program (TEMEP) of the Seoul National University.

The recent paradigm of corporate valuation is expanding to include non-financial factors, such as environment, social, and governance (ESG), beyond the financial performance of a company. In other words, ESG – the impact of the company on the environment, whether the company fulfills its social responsibilities, and the transparency in the company’s governance – are the keys to the future of the company.

To proactively respond to changes in the business environment as well as the needs of stakeholders, SK hynix is accelerating ESG management by continuing its Double Bottom Line (DBL), a management philosophy to pursue economic value and social value at the same time.

In September 2020, as part of the efforts to achieve ESG management, SK hynix launched an ESG task force (TF) under the immediate control of the CEO, which then was promoted to a regular organization at the end of the year. In 2021, in particular, SK hynix plans to establish the “ESG Management Committee”, a monthly meeting body directly supervised by the CEO, to formulate mid- to long-term ESG management policies and reinforce execution capabilities, and to eventually internalize related management systems.

Meanwhile, through his New Year’s message, Seok-Hee Lee, CEO of SK hynix talked about the company’s future plan for ESG management by saying, “Although it requires a lot of effort for a long time, SK hynix will reinforce ESG management to create more economic and social values, contribute to humanity and society, and step up on a virtuous cycle to develop into a more sustainable company.

The SK hynix’s global newsroom team heard from Bangsil Lee about her philosophy and future plans for ESG management.

1. What do you think is ESG management?

Basically, ESG is a concept starting from the perspective of “investors” among various stakeholders of a company. This is to figure out how a company is contributing to the environment and society under what type of governance, in order to ensure a more sophisticated corporate valuation than before. Specifically, investors are mainly asking for the three things: understanding risks arising from environmental issues in companies; understanding financial risks that can arise from the relationship with various stakeholders within the value chain ecosystem; and disclosure of information on the decision-making system of the corporate (governance) that manages these environmental and social risks.

What is important is how companies like SK hynix will respond to these changes in investors’ demands. Companies need to take a more proactive approach, not a passive approach such as responding reluctantly. I think it is necessary to expand the scope of thinking, rather than just staying in the realm of managing business risks and increasing operational efficiency. I believe that the core of ESG management that SK hynix should pursue is to use ESG as a growth momentum that can create new value by objectively diagnosing the company’s sustainability to reflect in the company’s long-term strategy.

2. Why did you choose SK hynix and what do you think is SK hynix’s ESG level, from the perspective outside the company?

SK hynix, which overcame all kinds of hardships and has established itself as a global semiconductor company, has continued to grow by constantly challenging itself without fear of crisis. I feel very happy and grateful for the opportunity to be part of this great company.

To the question related to SK hynix’s ESG level from the outside, I’d like to introduce the comments of Yoo-kyung Park, Head of APAC Responsible Investment & Governance at All Pensions Group (APG) Asset Management, the largest pension provider in the Netherlands. Park pointed out, “It is commendable that the SK Group has taken lead to emphasize social values sincerely; however, there is a concern that the social value is emphasized too much so that some affiliates are mistaken that the overall evaluation of ESG will improve, even if they do well in the social sector only.”¹ Of course, APG Asset Management does not represent the entire global asset management companies and it is an evaluation of the entire SK Group, not individual affiliates, such as SK hynix, but I think it has some significance.

3. What do you think are the core ESG topics that SK hynix should deal with?

Currently, the part where many investors put great importance is the corporate strategy to manage risks and discover opportunities in terms of environmental aspects, such as climate change response and water resource management. In particular, investors want companies to deal with ESG topics at the board of directors, the top decision-making body of a company, based on leadership. This is because they view ESG as a topic that should be reflected in long-term management strategy, not an operational topic to be handled at a specific department level within the organization.

4. Please tell us about your future plans and the vision you want to pursue at SK hynix.

It would be great if I can contribute to SK hynix to evolve and develop into a company that contributes to the happiness and prosperity of mankind and a company that is loved and respected by people more than now. By carefully listening to various voices inside and outside the organization, I will do my best to realize ESG management where all internal members can share their heart, while being recognized by external stakeholders.

¹ Source: https://dbr.donga.com/article/view/1205/article_no/9819/ac/magazine

The post SK hynix Starts ESG Management in Earnest by Recruiting an Industry Expert first appeared on SK hynix Newsroom.